An introduction to Bowie Resources

Chris Hansen is the Environmental Coordinator for Bowie Resources. He spoke at the Division of Oil, Gas and Mining meeting for coal producers and water users. He spoke about the sale of Arch Coal to Bowie Resources. Arch decided to divest their Western mines including mines in Colorado.

Hansen said their Canyon Fuel Company division was the most productive and profitable of the Arch holdings. But, they decided to sell so they could concentrate on their core properties.

Bowie Resources picked them up and Hansen said the transition has been pretty painless. They have all their permits changed now to the new company. The mines they own include SUFCO, Soldier Creek, which is idle and Skyline and Dugout. The company is managed out of Grand Junction. There are not a lot of new players, but a new parent for the company. Bowie has a commitment to the environment and to safety and production. Hansen said, "It's a good change, we are still adjusting, but mostly it's been seamless." Hansen said most of the coal produced at Bowie mines is used for power in Utah. The company ships coal overseas out of two California portals at Richmond and Stockton. The coal goes to South America and to Asian countries. Hansen said he is pessimistic about the coal market in the United States, but optimistic about the foreign market. Bowie has plans for expanding their reserves and is looking at new opportunities. Everything from Arch land was also transferred to Bowie. The geologists from Arch land came over to Bowie. The question was asked if Bowie would be as community minded as Arch and Hansen said yes, the new company would like to remain involved in community service.

The following is information from a prior article about the change from Arch to Bowie Resources.

Arch Coal, Inc. and Bowie Resources, LLC announced they have entered into a definitive agreement under which Arch will sell to Bowie its wholly-owned subsidiary, Canyon Fuel Company, LLC, for $435 million in cash, subject to customary adjustments for working capital and other items. Both companies have approved the transaction, which is expected to close in the third quarter of 2013. "The sale of our Utah operations is consistent with our previously announced plan to unlock value for our shareholders by divesting certain non-core thermal coal assets," said John W. Eaves, Arch's president and CEO. "As part of our strategy, we have been diligently focused on optimizing our asset base, expanding our coal export network, reducing our discretionary capital spending and re-aligning our portfolio for growth. With this transaction, we're delivering on a number of these initiatives while also enhancing our financial flexibility."

Canyon Fuel includes the Sufco and Skyline longwall mines and the Dugout Canyon continuous miner operation, all located in Utah. In addition to these active operations and related support facilities, Bowie will receive approximately 105 million tons of bituminous coal reserves in Utah. After the transaction is completed, Bowie plans to keep the existing 725-person workforce in place at the Canyon Fuel operations.

"From the inception of our ownership of Bowie, our goal has been to establish a core business rooted in the Western Bituminous Region and to grow it, not only organically but with synergistic acquisitions," said John J. Siegel, a principal owner of Bowie. "In that context, it would be hard to imagine a more logical next step in our evolution than the purchase of these superior Canyon Fuel mines."

"The divestiture of Canyon Fuel will streamline Arch's mine portfolio and allow us to focus on the most value-enhancing parts of our business, such as building out and upgrading our Appalachian metallurgical coal platform and optimizing our low-cost thermal coal franchise to serve the domestic and export coal markets," said Eaves. "Our Utah operations have generated more than $600 million in free cash flow for Arch since 1998 and have created significant value for our company. But we believe that monetizing these assets now, before investing meaningful additional capital, is the right course of action for our shareholders."

Arch will retain its Mountain Coal Company's West Elk mine in Colorado and approximately 300 million tons of coal reserves in the Western Bituminous Region, including bituminous reserves located in southern Wyoming. In 2012, the West Elk mine sold 6.7 million tons of high-quality, low-sulfur coal, of which roughly 40 percent was shipped into the seaborne thermal market. "West Elk is a valuable, low-cost asset with a broad market reach that includes customers in the eastern and western United States and in the international arena," said Paul A. Lang, Arch's executive vice president and chief operating officer.

As a result of the sale of its Utah operations, Arch expects to achieve cumulative capital and administrative cost savings of more than $200 million from 2014 through 2017. These expected future savings, which primarily represent capital spending to sustain current production levels, should further enhance Arch's liquidity position. Upon completion of the transaction, Arch will receive cash proceeds of $435 million before adjustments and will recognize a pre-tax gain of approximately $120 million related to the sale of Canyon Fuel. This gain will be included in Arch's adjusted earnings before interest, taxes, depreciation, depletion and amortization ("EBITDA") calculation, in accordance with the company's credit agreements.

In 2013, Arch forecasted that Canyon Fuel would sell around 9 million tons of coal, primarily to regional power producers and domestic industrial facilities in Utah, Nevada and California. Based on such sales, Canyon Fuel was projected to generate pro forma EBITDA of roughly $90 million, with planned capital expenditures of $15 million to $20 million, in 2013.

"Bowie has a long operating history in the Western Bituminous Region," said Eaves. "Bowie also has deep knowledge and experience in serving the region's customer base, and is well positioned to manage the opportunities and challenges associated with mining in Utah. We thank the talented employees of Canyon Fuel for their significant contributions to Arch's success over the past 15 years, including upholding exemplary safety and stewardship practices, providing countless hours of service and making many generous donations to local communities. We are confident that they will continue this track record of excellence as Bowie employees."

"The Bowie employees' motto of 'the best of the best' dovetails perfectly with the obvious work ethic and commitment to excellence that has long been the hallmark of the workforce at Canyon Fuel," said Siegel. "We are proud to bring these two skilled teams together, and we believe we have the opportunity to create something very special here."

Bowie has obtained a committed financing arrangement, led by Morgan Stanley Senior Funding Inc. and Deutsche Bank AG New York Branch, to fund the transaction.

Galena Private Equity Resources Fund ("Galena") will provide a cash investment to acquire a minority equity stake in Bowie. Consummation of the transaction is subject to certain governmental and regulatory conditions and approvals and other customary conditions.

Bowie Resources, LLC is a privately owned coal company with headquarters in Louisville, Ky. Bowie operates the Bowie #2 underground longwall mine, located near Paonia, Colo. has been to establish a core business rooted in the Western Bituminous Region and to grow it, not only organically but with synergistic acquisitions," said John J. Siegel, a principal owner of Bowie. "In that context, it would be hard to imagine a more logical next step in our evolution than the purchase of these superior Canyon Fuel mines."

"The divestiture of Canyon Fuel will streamline Arch's mine portfolio and allow us to focus on the most value-enhancing parts of our business, such as building out and upgrading our Appalachian metallurgical coal platform and optimizing our low-cost thermal coal franchise to serve the domestic and export coal markets," said Eaves. "Our Utah operations have generated more than $600 million in free cash flow for Arch since 1998 and have created significant value for our company. But we believe that monetizing these assets now, before investing meaningful additional capital, is the right course of action for our shareholders."

Arch will retain its Mountain Coal Company's West Elk mine in Colorado and approximately 300 million tons of coal reserves in the Western Bituminous Region, including bituminous reserves located in southern Wyoming. In 2012, the West Elk mine sold 6.7 million tons of high-quality, low-sulfur coal, of which roughly 40 percent was shipped into the seaborne thermal market. "West Elk is a valuable, low-cost asset with a broad market reach that includes customers in the eastern and western United States and in the international arena," said Paul A. Lang, Arch's executive vice president and chief operating officer.

As a result of the sale of its Utah operations, Arch expects to achieve cumulative capital and administrative cost savings of more than $200 million from 2014 through 2017. These expected future savings, which primarily represent capital spending to sustain current production levels, should further enhance Arch's liquidity position. Upon completion of the transaction, Arch will receive cash proceeds of $435 million before adjustments and will recognize a pre-tax gain of approximately $120 million related to the sale of Canyon Fuel. This gain will be included in Arch's adjusted earnings before interest, taxes, depreciation, depletion and amortization ("EBITDA") calculation, in accordance with the company's credit agreements.

In 2013, Arch forecasted that Canyon Fuel would sell around 9 million tons of coal, primarily to regional power producers and domestic industrial facilities in Utah, Nevada and California. Based on such sales, Canyon Fuel was projected to generate pro forma EBITDA of roughly $90 million, with planned capital expenditures of $15 million to $20 million, in 2013.

"Bowie has a long operating history in the Western Bituminous Region," said Eaves. "Bowie also has deep knowledge and experience in serving the region's customer base, and is well positioned to manage the opportunities and challenges associated with mining in Utah. We thank the talented employees of Canyon Fuel for their significant contributions to Arch's success over the past 15 years, including upholding exemplary safety and stewardship practices, providing countless hours of service and making many generous donations to local communities. We are confident that they will continue this track record of excellence as Bowie employees."

"The Bowie employees' motto of 'the best of the best' dovetails perfectly with the obvious work ethic and commitment to excellence that has long been the hallmark of the workforce at Canyon Fuel," said Siegel. "We are proud to bring these two skilled teams together, and we believe we have the opportunity to create something very special here."

Bowie has obtained a committed financing arrangement, led by Morgan Stanley Senior Funding Inc. and Deutsche Bank AG New York Branch, to fund the transaction.

Galena Private Equity Resources Fund ("Galena") will provide a cash investment to acquire a minority equity stake in Bowie. Consummation of the transaction is subject to certain governmental and regulatory conditions and approvals and other customary conditions.

Bowie Resources, LLC is a privately owned coal company with headquarters in Louisville, Ky. Bowie operates the Bowie #2 underground longwall mine, located near Paonia, Colo.